The Intersection of Drones and Insurance March 30, 2017 Aaron - - PowerPoint PPT Presentation

The Intersection of Drones and Insurance

March 30, 2017 Aaron Simon, Esq. Brownson & Linnihan, PLLP

1) Regulatory/legal matters affecting drone use. 2) Use of Drones by Insurance Companies. 3) Insurance products regarding the commercial use of

drones.

4) Insurance products regarding personal use of drones.

Arc deTriomphe in Paris.

• The FAA estimates seven million drones will fly in US

skies by 2020. Up from 2.5 million in 2016.

• In the 2014-2015 holiday season there were nearly one

million consumer drones sold in the U.S.

• In 2016 FAA estimates 600k commercial drones in use.

2.7 million in 2020.

• Drone industry in 2020.
• Estimated Annual growth rate of 32% between 2015 and

2020 into a $5.6 billion industry.

• Out of the four major companies that produce drones,

DJI is the biggest. Chinese Co. Founded in 2006.

• In May of 2016, it was valued at $10 billion -- nearly six

times the market cap of GoPro at the time, which is now entering the drone market.

• DJI sales ‘13 – $130M, ‘14 – $500M, ‘15 – $1B. ‘17 IPO?

Manhattan, NewYork.

1)

1958 Federal Aviation Administration or FAA established. Predecessor was Civil Aeronautics Administration (CAA).

2)

Through the FAA the Federal Government controls all U.S. airspace. There are several different types of airspace depending on altitude and location to important/restricted areas (airports, stadiums, etc..)

3)

1981 – FAA issued Advisory Circular 91-57, Model Aircraft Operating

• Standards. Model RC airplanes had been around since early 1900s.

4)

In the Mid 2000s FAA clarified that commercial use of drones was illegal/prohibited. Only exception was COAs from the FAA, and only granted to businesses with a public entity (public university or government agency) as a sponsor. 2005 to 2013 timeframe.

5)

But drone use (particularly commercial) was limited.

6)

There still was a carve out for recreational/personal use.

7)

Desire to use drones commercially vastly increased.

8)

Ease of regulation began with granting exemptions – section 333. Started in 2013. No longer needed public entity sponsor but still hard to obtain.

9)

Hundred of pages in application and $10,000 plus in legal fees. Takes six months or longer.

10) Initially commercial pilot’s license required – gradually relaxed. 11) 500 feet from any vehicle, vessel or structure. Needed permission.

500 feet from any uncovered person regardless. Many other rules.

12) These were extreme constraints. Very prohibitive. 13) January 2016 some companies began pushing more relaxed drone

use for industry. In August 2016, new rules approved.

14) Current FAA rules (Part 107):

a)

Must weigh less than 55 lbs. (25 kg).

b)

Line of sight.

c)

Not over any person not involved in use of drone.

d)

Daylight only.

e)

Maximum groundspeed of 100 mph (87 knots).

f)

Maximum altitude of 400 feet.

g)

… Federal government has jurisdiction but states attempting to assert jurisdiction.

13) Registration required. In December of 2015 the FAA announced that

all UAVs weighing more than 250 grams flown for any purpose must be registered with the FAA.

14) State and local rules. 13) Personal privacy and trespass issues.

Resources:

a)

www.faa.gov/uas

b)

https://www.faa.gov/uas/media/Part_107_Summary.pdf

c)

https://www.faa.gov/uas/resources/uas_regulations_policy/media/u as_fact_sheet_final.pdf

d)

http://www.ncsl.org/research/transportation/current-unmanned- aircraft-state-law-landscape.aspx

e)

https://www.faa.gov/about/history/timeline/

• Take away - there is a lot of regulation of commercial

drone use. It’s new. It’s complicated.

• Regulation frequently changing. Generally becoming

less regulated.

• Potential for conflict/inconsistency between Federal

Law (FAA) and State and local law.

• Lots of illegal/unauthorized commercial drone use.

Wild WILD West – but FAA is beginning to crack down.

Volcano Plosky in Kamchatka, Russia

1)

$55,000 fine for taking photos for friend. http://dailysignal.com/2016/06/12/he-flew-a-drone-to-take- photos-for-a-friend-now-hes-facing-55k-in-government-fines/

2)

Drone photography company fined $200,000 by FAA. Drone- photography company fined $200,000 by FAA – initial fine sought was $1.9 millillion - http://www.usatoday.com/story/news/2017/01/17/faa-drone- skypan/96671342/

3)

Cleveland Indians starting pitcher Trevor Bauer was pitching Game 3 of his team’s playoff series against the Toronto Blue Jays in October of 2016 when a serious cut on his right hand pinky finger caused his to exit game. https://petapixel.com/2016/10/18/pitcher-exits-playoff-game- bloody-finger-shows-danger-drones/ http://www.slate.com/blogs/the_slatest/2016/10/17/drone_injury_fo r_cleveland_indians_pitcher_forces_him_from_game_with_bleedin g.html

4)

12 drone disasters that show why the FAA hates drones.

a) Drone crashes near the White House b) Drone "attack" on German Chancellor Angela Merkel c) Drone cuts off tip of photographer's nose d) Drone injures Australian triathlete e) Drone injures bystanders in Virginia crowd f) Drone flies too close to a news helicopter g) Drone nearly crashes into Airbus A320 h) Drone caught carrying drugs near the border i) Drone flies over Bank of America Stadium j) Drone flies over Comerica Park k) Drone crashes into Grand Prismatic Spring l) Drone attacked by hawk http://www.techrepublic.com/article/12-drone-disasters-that-show-why-the-faa-hates-drones/

Lots of potential for problems.

Iguasu Falls Argentina

1) Underwriting (e.g. - inspection of hard to reach

areas, roofs, inside of boiler, agriculture)

2) Claims (e. g. site investigations, flooded areas,

towers, high pitched roofs).

3) Cost savings at a minimum in the millions.

3) As of April of 2015 four insurance companies had

received approval to use drones for claims and risk management.

a) AIG b) Erie Insurance Group c) State Farm d) USAA

http://riskandinsurance.com/insurers-flying-high/

https://www.cbinsights.com/blog/drone-property-insurance/

https://www.cbinsights.com/blog/drone-property-insurance/

Travelers has a Claims University to train its claims professionals. At the claims university they show how drones can be used to adjust claims.

http://www.cio.com/article/3084454/it-industry/how-drones- help-insurance-firm-survey-property-damage.html

1)

Drone footage of roof inspection – https://www.youtube.com/watch?v=PsEI5a5yJJ8

2)

Wind Turbine Inspection - https://www.youtube.com/watch?v=5MDUs5vBl_k

3)

Drone Solar Panel Inspection with FLIR - https://www.youtube.com/watch?v=zfRaq2d0kZg

4)

MnDOT tests drones for bridge inspections - https://www.youtube.com/watch?v=a4QcwQZPwcU

5)

http://dronelife.com/2017/03/27/drones-revolutionizing-inspections/

Recent News Articles Drones are proving to be a valuable tool for adjusters. Property Casualty 360, March 22,

• 2016. http://www.propertycasualty360.com/2016/03/22/drones-are-proving-to-be-a-valuable-

tool-for-adjus 3 Ways Drones Could Change the Insurance Industry - Here's how the insurance industry could save as much as $6.8 billion per year by using remote-controlled drones. The Motley Fool, September 22, 2016. https://www.fool.com/investing/2016/09/22/3-ways-drones-will- change-the-insurance-industry.aspx Insurance industry sees drones taking claims work to new heights. Marketplace, September 29, 2016. https://www.marketplace.org/2016/09/27/business/insurance-industry-sees-drones- taking-claims-work-new-heights

Angel Falls inVenezuela

1)

Types of commercial uses: (Construction companies, Utilities, Real estate agents, Marketing firms, Motion picture industry, etc..)

2)

Separate drone policies v. add on coverage to CGL policy.

3)

Commercial use probably better understanding and managing the risk of drone use.

4)

Coverage for commercial use drone use under typical general liability policies. Probably not. Policy language will determine.

Unmanned Aircraft Exposures and ISO forms Form Number Form Name Coverage A Coverage B CG 21 09 Exclusion – UnmannedAircraft Excluded Excluded CG 21 10 Exclusion – UnmannedAircraft (CoverageA Only) Excluded Not applicable CG 21 11 Exclusion – UnmannedAircraft (Coverage B Only) Not applicable Excluded CG 24 50 LimitedCoverage For Designated UnmannedAircraft Excluded except for designated UAS Excluded except for designated UAS CG 24 51 LimitedCoverage For Designated UnmannedAircraft (CoverageA Only) Excluded except for designated UAS Not applicable CG 24 52 LimitedCoverage For Designated UnmannedAircraft (Coverage B Only) Not applicable Excluded except for designated UAS

5)

AIG has an online application for drone insurance.

6)

Insurance options that cover single drone flights and blanket policies to cover periods of time, like an auto insurance policy.

7)

Currently, reports of insurance providers insuring commercial drone companies for up to $500 million in liability and up to $10 million in hull damage.

8)

Potential issue - Does commercial coverage match regulations?

9)

Specific Drone insurance policies are usually broken up into two parts: a) Liability (damage and claims to third parties) b) Hull damage (damage related to your UAV).

11) Rates currently range from about $900 per drone per year on the low

end to $10,000 per drone per year on the high end.

12) A new company, Verifly, provides on-demand policies for personal and

commercial users for about $10 an hour, currently approved in 45

• states. The user simply geo-locates through an app. The policy covers

a quarter-mile radius for up to $1 million of third-party liability and unintentional invasion of privacy. http://www.insurancejournal.com/news/national/2016/11/18/432502.htm

13) New 2017 average “ballpark” pricing from one carrier – liability

• nly - does not offer physical damage coverage at this time.

$1,000,000 UAV Liability Limits – $750/yr. $2,000,000 UAV Liability Limits – $1,050/yr. $3,000,000 UAV Liability Limits – $1,450/yr. $5,000,000 UAV Liability Limits – $2,050/yr. http://uavcoach.com/drone-insurance-guide/

14)

List of Drone Insurance Brokers (may not be complete)

Aerial Pak (Hill & Usher) Allianz Avalon Risk Management Aviation Insurance (Pat Costello) Aviation Insurance Resources AVION Insurance Berkley Aviation BWI Aviation Insurance Driessen Assuadeuren (Drone-Insurance.com) Full Frame Insurance Harpenau Insurance Agency Houston Casualty Kinney Pike Insurance MeadowBrook SkySmith Skyvuze Starr Aviation Sutton James Incorporated SwissRE Transport Risk Management UAV Protect Unmanned Risk Management USAIG Verifly XL Catlin

http://uavcoach.com/drone-insurance-guide/

15)

List of Drone Insurance Underwriters (may not be complete) AIG Global Aerospace Lloyds http://uavcoach.com/drone-insurance-guide/

Taj Mahal in India

1)

Types of personal use of drones.

2)

Coverage already in place through homeowner’s/renter’s policy

• vs. separate drone policies v. add on coverage.

3)

Personal use probably much less understanding and managing the risk of drone use.

4)

Current status of personal insurance for drones is somewhat unclear.

5)

A few years ago generally most homeowner’s policies will cover use of drones – at least for personal use.

6)

This is changing. More and more exclusions being added for use

• f drones.

7)

Now most(?) homeowner’s policies will not cover personal or commercial use of drones??? Policy language will determine.

8)

If coverage is in place does this cover everything?

9)

Invasion of privacy – intentional or unintentional.

10) Some companies will only issue policies for commercial drone

use.

11) Anticipated more and more insurance companies will offer

drone coverage for personal use.

Dubai, UAE

NeuschwansteinCastle in Germany.

Aaron Simon

Tel: (612) 315-6327 Asimon@brownsonlinnihan.com